Michigan’s governor has approved the legislation (2023-HNB-5100) on 13 January 2025, which introduces a research and development (R&D) tax credit in Michigan.

This new incentive will take effect for tax years beginning on or after 1 January 2025.

For an authorised business with 250 or more employees, an amount equal to the sum of 3% of the taxpayer’s qualifying research and development expenses incurred during the calendar year ending with or within the tax year up to the base amount and 10% of the taxpayer’s qualifying research and development expenses incurred during the calendar year ending with or within the tax year over the base amount. The credit amount calculated under this subdivision must not exceed USD 2 million per tax year per taxpayer.

For an authorised business with less than 250 employees, an amount equal to the sum of 3% of the taxpayer’s qualifying research and development expenses incurred during the calendar year ending with or within the tax year up to the base amount and 15% of the taxpayer’s qualifying research and development expenses incurred during the calendar year ending with or within the tax year over the base amount. The credit amount calculated under this subdivision must not exceed USD 2 million per tax year per taxpayer.

To be eligible for a credit under this section, a taxpayer must submit, in a form and manner as prescribed by the department, a tentative claim for which a credit under this section is sought to the department on or before 1 April 2026 for tentative claims made for qualifying research and development expenses incurred during the 2025 calendar year and for tentative claims made for qualifying research and development expenses incurred for each calendar year after 2025 on or before 15 March after the calendar year ending with or within the tax year for which the taxpayer intends to submit a claim for the credit on the taxpayer’s annual return required under this part.

The state will award up to USD 100 million in tax credits annually. If total claims exceed this amount, the credits will be distributed on a prorated basis.